A&B ABstract: On February 24, Governor Kathy Hochul signed into law Assembly Bill 8771 (2022 N.Y. Laws 48), amending single point of contact requirements for certain delinquent borrowers. What changes does the measure require for servicer protocols?
New York SPOC Requirements: As created effective January 2, 2022, Section 6-o of the New York Banking Law required a lender to provide a single point of contact ("SPOC") to a borrower who: (a) is 60 or more days delinquent on a "home loan"; and (b) chooses to pursue a loan modification or other foreclosure prevention alternative. The obligation arose in response to a written or electronic request from the borrower, and required the lender (or a servicer acting on the lender's behalf) to provide the SPOC within 10 business days of such request.
As amended by AB 8771 retroactive effect to its creation, the section: (a) applies the SPOC obligation to any borrower who is 30 or more days delinquent; and (b) no longer conditions the obligation on an affirmative request from the borrower. The amended section also authorizes the Superintendent of Financial Services to establish rules and regulations relating to the SPOC requirement.
Impact of the Amendment: The amendment brings Section 6-o of the Banking Law closer to the language of New York's Mortgage Loan Servicer Business Conduct Regulations ("Part 419" of the Superintendent of Financial Services Regulations). Since its adoption in final form in December 2019, Rule 419.7 has required a servicer to "assign a single point of contact to any borrower who is at least 30 days delinquent or has requested a loss mitigation application (or earlier at a servicer's option)." (Emphasis added.) As we have discussed, both requirements are in contrast to the CFPB's Mortgage Servicing Rules, which requires assignment of a SPOC to borrowers who are 45 days delinquent. However, there are a few notable distinctions.
First, Section 6-o does not define a "single point of contact," leaving open whether only one individual may serve that role with respect to any particular borrower. Part 419 provides the SPOC may be either "an individual or designated group of servicer personnel each of whom has the ability and authority to perform the responsibilities" of the SPOC as set forth in Rule 419.7(b). Part 419 further clarifies, however, that if a servicer designates a group of personnel to fulfill the SPOC responsibilities, "the servicer shall ensure that each member of the group is knowledgeable about the borrower's situation and current status in the loss mitigation process, including the content and outcome of any communication with the borrower."
Second, Part 419 specifies the obligations of a servicer and a designated SPOC for a delinquent borrower. Specifically, Part 419:
- requires the SPOC to "attempt to initiate contact with the borrower promptly following the assignment of the single point of contact to the borrower;"
- specifies the responsibilities of the SPOC with respect to the borrower's participation in loan modification or loss mitigation activities;
- requires coordination with other servicer personnel (in particular, to ensure that foreclosure proceedings are halted when required by Part 419); and
- requires the SPOC to remain assigned and available to the borrower until either the borrower's account becomes current or the servicer determines that the borrower has exhausted all loss mitigation options available from or through the servicer.
Section 6-o, by contrast, does not include such specifications. However, by granting the Superintendent rulemaking authority, the amended section leaves open the possibility that such requirements may be established by rule.
Finally, the requirement under Rule 419.7 provides broad coverage, extending to any mortgage loan serviced by a servicer within the scope of Part 419 (i.e., all first- and subordinate-lien forward and reverse mortgage loans) where the borrower (a) is 30 days or more delinquent, or (b) has requested a loss mitigation application. By contrast, the requirement under Section 6-o applies to a narrower subset of residential mortgage loans. The obligation extends only to a "home loan," defined under Section 6-l of the Banking law to be limited to forward mortgages secured by one- to four-family residential property that, at origination, do not exceed the Fannie Mae conforming loan limit (among other conditions). Further, the obligation under Section 6-o requires both that the borrower meet the delinquency threshold (30 or more days) and have chosen to pursue a loan modification or other foreclosure prevention alternative.
Takeaways: Given the distinctions between the obligations to which a lender is subject under Section 6-o (and which it may delegate to a servicer), and those to which a servicer is subject under Part 419, we recommend careful review and coordination of loss mitigation procedures to ensure the proper fulfillment of SPOC obligations for delinquent borrowers in New York. Further given the retroactive effective date of the measure, the need for such review is urgent.
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